BREWERIES LIFT LOCAL REAL ESTATE MARKET

Beer makers headed toward 1 million square feet of industrial space

San Diego’s burgeoning craft-beer business is boosting the local industrial real estate market, according to Todd Davis, a broker at Cassidy Turley.

Davis, who has been specializing in brewery space needs since the mid-1990s, projected that local beer companies will need about 215,000 square feet of new industrial space over the next 12 to 24 months and take the total over the 1 million mark.

“We still have life sciences, defense and lot of other industry clusters that are larger than craft beer, but it’s definitely one of the emerging trends right now,” Davis said.

With 71 craft beer companies operating in San Diego County at latest count, Davis said only a handful occupy more than 10,000 square feet. And he said startup costs can be significant — $500,000 or more in plumbing, drainage, equipment and other expenses — compared with the typical warehouse-type industrial user. But that’s not stopping new companies from making a go of it.

“I think it’s much more than a niche,” he said. “I think you’re going to see growth out there. If we look out beyond the next 12 to 24 months, I know a number of breweries are looking to ramp up even more than what’s going on now.”

For example, Lost Abbey, Davis’ favorite brew, plans an 80- to 100,000-square-foot facility in the next five years. Ballast Point is already committed to adding a 100,000-square-foot plant in the Miramar area.

Still, San Diego’s total industrial real estate market encompasses nearly 8,600 buildings in almost 190 million square feet, according to CoStar Group. About 75 percent of the space is counted as warehousing; the breweries are considered a light-manufacturing use.

Davis cited previous studies that show about 24,400 jobs in beer making translate to $3.5 billion in economic output.

“San Diego has evolved into one of the top craft-beer markets in the U.S.,” he said. “There are very few restaurants, pubs or stores that do not carry locally brewed beer.”

He said it’s inevitable that national and international beer companies will eye the acquisition of one or more local breweries, but he didn’t think they would necessarily lead to relocating operations elsewhere.

“You can probably make an argument for some of that (relocation), but it’s the style of beer coming out of there that is very regional,” he said. “That’s not to say they can’t re-create that same style somewhere else. But the (local) brewing community cooperates with each other and shares a lot of information, yeast, excess hops. There’s a lot that goes on to being in this area.”

Davis said recent growth has made San Diego as significant to beer as the Napa Valley is to wine.

“We’re the Napa Valley of craft beer right now,” he said. “Some of the best, most decorated brands are coming out of San Diego.”

He said San Diego’s reputation for taste — more hoppy, less sweet, more alcoholic than in other regions — makes it a growing favorite on the East Coast.

“A beer on the East Coast with a San Diego address carries a lot of weight,” he said. “Stone is getting $15 to $20 for a six-pack back in New York. You can make it elsewhere, but you get a different water source.”

Davis said he got into the real estate end of the business when he represented the landlord when Stone Brewery acquired its facility in Escondido in 1996. He has represented Ballast Point, Pizza Port, Lost Abbey, Mother Earth and White Labs, a yeast-production company in the Miramar area.

“I do love craft beers — it helps,” he said. “But part of it was being up in North County. I saw the trend coming. I reached out and talked to several of the players and it’s such a close-knit community, a lot of them referred me over to their buddies.”